92 Decision Citation: BVA 92-00128
Y92
BOARD OF VETERANS' APPEALS
WASHINGTON, D.C. 20420
DOCKET NO. 91-39 141 ) DATE
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THE ISSUE
Entitlement to waiver of recovery of a loan guaranty
indebtedness.
WITNESS AT HEARING ON APPEAL
Appellant's wife
ATTORNEY FOR THE BOARD
Elving L. Torres, Counsel
INTRODUCTION
The veteran served on active duty from August 1963 to August
1967.
This matter came before the Board of Veterans' Appeals (the
Board) from a decision by the Committee on Waivers and
Compromises (the Committee) of the Los Angeles, California
Regional Office (VARO or RO) in March 1987, which denied the
appellant's claim filed in October 1986. The appellant was
notified in March 1987. A hearing had been held at VARO in
January 1987. The notice of disagreement was received at
the Department of Veterans Affairs (VA) Regional Office in
March 1987. The statement of the case was issued in April
1987. The substantive appeal was received at the VARO in
May 1987. Another decision by the Committee granted a
partial waiver, reducing the entire indebtedness to $3,000,
in April 1991. A supplemental statement of the case was
provided in April 1991. The appeal was received at the
Board on August 6, 1991. The case is now ready for
appellate consideration.
CONTENTIONS OF APPELLANT ON APPEAL
The appellant has not submitted any arguments after VARO
adjudicated his claim on the basis of equity and good
conscience in April 1991, when he was issued the pertinent
supplemental statement of the case. It may be inferred from
his appeal to the Board in May 1987, prior to the subsequent
partial grant of waiver of the loan guaranty indebtedness,
that he asserts that he acted in good faith. He states that
he turned the property over to M. R. Equities, Inc., a real
estate investment company, with the expectation that the VA
loan would be paid in full. He submits that if recovery of
the entire indebtedness cannot be waived, the amount of
indebtedness be reduced to $3,000 which he would pay at a
rate of $100 per month.
DECISION OF THE BOARD
For the reasons and bases hereinafter set forth, it is the
decision of the Board that recovery of $3,000, plus accrued
interest on this amount, in reasonable monthly installments,
would not impose an undue financial hardship upon the
appellant and his family or otherwise be inequitable.
FINDINGS OF FACT
1. The appellant defaulted on a loan that was guaranteed by
the Department of Veterans Affairs (VA), and foreclosure was
instituted.
2. The property was sold at a liquidation sale for an
amount less than the principal amount of the home loan,
accrued interest, and foreclosure expenses.
3. VA was required to pay the lender's guaranty claim on
behalf of the appellant, who had remained liable for the
loan, and who has been charged with the loan guaranty
indebtedness in the original amount of $12,141.41, which was
subsequently reduced to $3,000, plus interest.
4. There was some fault on the part of the appellant in the
creation of the debt.
5. The appellant's monthly net income is greater than the
monthly expenses, and he currently has no significant debt
other than the loan guaranty indebtedness.
6. Recovery of the remaining loan guaranty debt, $3,000,
plus interest on this amount, from the appellant would not
deprive him or his family of the basic necessities of life
nor would recovery of this reduced amount of debt otherwise
be inequitable.
CONCLUSIONS OF LAW
1. After default, there was a loss of property which
secured a loan guaranteed by the Department of Veterans
Affairs. 38 U.S.C. § 5302 (1989) (formerly § 3102,
recodified in 1991); 38 C.F.R. § 1.964 (1991).
2. Recovery of the reduced loan guaranty indebtedness,
$3,000, plus accrued interest, would not violate the
standards of equity and good conscience. 38 U.S.C. § 5302;
38 C.F.R. § 1.965.
REASONS AND BASES FOR FINDINGS AND CONCLUSIONS
Initially, the Board notes that we believe that the veteran
has presented evidence which is sufficient to lead to the
belief that a well grounded claim has been presented. We
further believe that the agency of original jurisdiction has
adequately and properly developed this case for appellate
purposes and that we may proceed to a disposition of this
case. 38 U.S.C. § 5107(a) (1989) (formerly § 3007(a),
recodified in 1991).
The validity of the loan guaranty indebtedness is not in
dispute. In February 1987, the appellant was provided an
accounting on how the loan guaranty debt was established.
The breakdown of the indebtedness included, among other
items, the amounts of interest, taxes, and insurance
expenses. His liability on the loan is also not in
dispute. His argument in May 1987 that he acted in good
faith is considered when the issue is whether waiver of
recovery of a loan guaranty indebtedness is precluded by
fraud, misrepresentation, or bad faith. However, that is
not at issue because VARO has determined that there was no
evidence of fraud or misrepresentation, and that bad
judgment rather than bad faith was demonstrated. 38 U.S.C.
§ 5302(c) (1989) (formerly § 3102(c), recodified in 1991);
38 C.F.R. § 1.965(b); effective December 18, 1989).
The original amount of loan guaranty indebtedness was
reduced to $3,000 by a partial waiver of $9,141.41 in April
1991. The appellant was notified of this partial grant of
waiver of indebtedness in a supplemental statement of the
case in April 1991. He did not submit additional statements
following the partial grant of the loan guaranty debt. The
issue to be resolved on appeal is whether recovery of the
remaining $3,000 would be against equity and good
conscience. In evaluating the veteran's claim, all of the
elements of the standard of equity and good conscience are
considered. The Board places particular emphasis on the
elements of fault, unjust enrichment, and financial
hardship. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.964(a),
1.965(a).
The basic facts can be briefly described. In March 1981,
the appellant applied for and was approved, as a veteran, a
home loan in the amount of $68.000, which was guaranteed by
VA. At the time of the VA home loan guaranty application,
the appellant signed the borrower's liability statement.
The closing of the transaction was in April 1981. The loan
was secured by a Deed of Trust and Trust Note.
The veteran defaulted, and the first uncured default was in
December 1983. The notices of default and of intention to
foreclose in April 1984 indicate that the veteran was still
the owner of the property. According to the veteran's May
1987 statement, he "turned the property over" to M. R.
Equities, Inc., in April 1984 (while the loan was in default
and foreclosure proceedings were being instituted), but this
investment company "never had any intention" to make the
mortgage payments. The veteran did not make a serious
attempt to sell the house to a buyer who whould expressly
assume the loan payments and become liable to VA on the
loan. According to testimony at the hearing in January 1987
and a copy of a March 1984 sale escrow document, there was
no financial transaction of the property and transfer of the
title was to a "real estate speculator."
The appellant's failure to make other attempts to avoid
foreclosure, such as requesting a deed-in-lieu of
foreclosure or to arrange for a payment plan, indicate at
least some degree of fault because the circumstances
involving the default were not entirely beyond his control.
He admits that he should have evicted his tenants to find a
satisfactory buyer for the property and should have
requested a deed-in-lieu of foreclosure.
The liquidation sale of the property was for the specified
amount of $66,512, in October 1984. The proceeds of the
foreclosure sale were insufficient to satisfy the total
amount owed to the lender after foreclosure expenses,
$78,653.41. VA was required to pay a claim to the lender on
behalf of the veteran, and the amount of indebtedness of
$12,141.41, plus interest, was charged to him.
As stated herein before, the total amount of indebtedness
has been reduced from $12,141.41 to $3,000. The issue
before the Board is whether waiver of the remaining loan
guaranty indebtedness would be appropriate under the
standard of equity and good conscience.
The appellant has submitted three financial status reports,
dated in November 1986, May 1987, and May 1990. He has been
continuously employed as a maintenance technician from May
1974 or 1979 to the present. He is married, 47 years of
age, and has two dependents. His wife has been working as a
nurse from January 1985 or 1986 until 1989, and is currently
giving home health care on a fee for service basis since
January 1990.
In his appeal to the Board in May 1987, the appellant
expressed his willingness to pay a reduced amount of loan
guaranty debt of $3,000 at $100 a month. The amount of debt
was reduced to $3,000. His financial status report of May
1990 shows $2,034 combined monthly net income and $1,962 of
monthly expenses. As reported, the net monthly net income
exceed the expenses by $72. We note that the total amount
of expenses include $250 for montly payments on installment
contracts, which are not listed. Apparently, most or all of
those installment contracts and other debts were written off
by bankruptcy proceedings reported in April 1990. At any
rate, the record shows that the appellant has the financial
ability to pay the reduced amount of VA loan guaranty
indebtedness, $3,000, plus interest on this amount, in
reasonable installments not to exceed $100 monthly. Payment
of the remaining amount of indebtedness in such manner would
not result in undue financial hardship or otherwise be
inequitable.
ORDER
Waiver of recovery of the reduced amount of indebtedness,
$3,000, plus accrued interest on this amount, is denied.
BOARD OF VETERANS' APPEALS
WASHINGTON, D.C. 20420
*
MATTHEW J. GORMLEY, III
KENNETH R. ANDREWS, JR.
*38 U.S.C. § 7102 (1989) (formerly 38 U.S.C. § 4002,
recodified in 1991) permits a Board of Veterans' Appeals
Section, upon direction of the Chairman of the Board, to
proceed with the transaction of business without awaiting
assignment of an additional Member to the Section when the
Section is composed of fewer than three Members due to
absence of a Member, vacancy on the Board or inability of
the Member assigned to the Section to serve on the panel.
The Chairman has directed that the Section proceed with the
transaction of business, including the issuance of
decisions, without awaiting the assignment of a third
Member.
NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C. § 7266 (1989)
(formerly 38 U.S.C. § 4066, recodified in 1991), a decision
of the Board of Veterans' Appeals granting less than the
complete benefit, or benefits, sought on appeal is
appealable to the United States Court of Veterans Appeals
within 120 days from the date of mailing of notice of the
decision, provided that a notice of disagreement concerning
an issue which was before the Board was filed with the
agency of original jurisdiction on or after November 18,
1988 (see § 402 of the Veterans' Judicial Review Act
(Pub. L. 100-687)). The date which appears on the face of
this decision constitutes the date of mailing and the copy
of this decision which you have received is your notice of
the action taken on your appeal by the Board of Veterans'
Appeals.